High-performing boards contribute to shareholder value, strengthen companies, and improve confidence in the financial markets. But how do board committee chairs and lead independent directors help their boards achieve the highest levels of performance?
Committee chairs craft agendas that give directors adequate time and resources to make informed decisions. They sequence, filter, and pace the flow of information to ensure that their board colleagues are informed by the right facts for productive dialogue. They ensure robust discussion that raises questions and provides constructive criticism. They guide conversations that surface dissent and move toward consensus.
While highly effective boards are more than the sum of their parts, they are inevitably composed of the highest caliber directors – people who bring different backgrounds to their common commitment to understand the company, its strategy, and the environment in which it operates.
Committee chairs and lead directors attract and recruit these exceptional individuals and ensure they perform regular performance self-assessments. And, because these highly-qualified directors will not serve forever, highly effective boards are prepared with succession plans for all key roles.
Compensation philosophy and practice
Among the most important and challenging responsibilities of the compensation committee are developing long-term incentive plans for senior executives and defining appropriate peer groups to inform pay decisions. Members of the Compensation Committee Leadership Network discussed how they are responding to these challenges with David Chun, CEO of Equilar, and Charles Elson, Edgar S. Woolard, Jr., chair of the John L. Weinberg Center for Corporate Governance at the University of Delaware at the network's 18th meeting.
Lessons learned from the recent proxy battle at Canadian Pacific Railway
Canadian Audit Committee Network members explored the Canadian Pacific Railway proxy battle with a focus on how the company's board responded to the challenge posed by an activist investor. Members offered each other lessons learned about performance assessment, board dialogue with the CEO about performance, board access to shareholders' views, and the critical role board culture plays in the face of major change.
The board’s role in strategy oversight
As one board committee chair said, "Strategy is the most important thing that the board considers... What is sufficient? What is the right level of involvement? At what point has the board really discharged its responsibility? Members of the North and South chapters of the WACN met in a joint session to discuss these and other questions related to effective board and audit committee oversight of strategy.
Evaluating the audit and the external auditor
Scrutiny of the auditing profession by policymakers and regulators has raised the question of whether and how audit committees can use their evaluations of their companies' external auditors to improve the audit. ACLN members and Cindy Fornelli, executive director of the CAQ, explored how leading audit committees perform audit evaluations and discussed the importance of strong relationships with the auditor.
Enhancing audit committee effectiveness
Boards, shareholders, and regulators are all raising the bar on their expectations for audit committees. Audit chairs are working to enhance their committees' effectiveness by improving processes, ensuring that high-quality information flows to and from the committee, and strengthening relationships with management and the external audit firm, according to members of the Southwest Audit Committee Network.
Board oversight of strategic risk
Many directors and boards are evaluating the risks that endanger corporate strategy more attentively than ever before. While each company's risk profile and response is unique, many directors are wrestling with challenging cybersecurity, key-person, and political risks. Given foresight's limitations, flawless risk oversight is an illusory goal. But better risk oversight is achievable, as demonstrated by the many emerging best practices for more expansive and imaginative risk oversight identified by lead directors.
Enhancing board performance
Members considered what it means to be a high-performing board, the critical components for enhancing board performance, and how boards may evaluate their own performance. Members were joined at the meeting by Dr. Ram Charan, New York Times best-selling author and advisor to many of the world's leading corporations.